The Balanced Scorecard—A Tool for Improving Results
The Service Repair Department of a Control Instrument Manufacturing Company
was in a state of disarray, or to put it in a more positive way—there was a heightened
sense of awareness of problems and a sense of urgency to make improvements.
The Manager had just taken over the department and was being asked to make a
complete turn around of the service repair operations. Inventory was out of control,
products were lying around on the floor, and the time to make repairs and get the
instruments back to the customer has mushroomed to as high as 50 days. The average for
the last month was 22 days. The competition’s time to make this type of repair on the
average was 10 days. Clearly, the Manager had received a mandate to make change!
Due to growth in sales within the Company an expansion of facilities was taking
place. The Service Department was going to be moved into the new building within three
months. There were high expectations to take advantage of the move to create a new
environment and level of performance. In retrospect this heightened the state of readiness
The Balanced Scorecard Approach
1. Select the appropriate organizational unit
The Service Department was the focus of the improvement project. I met with the
Manager and he shared the mission statement, the organizational chart, and the key result
areas of the department.
The mission statement stated that they would “provide quality customer service and
after-sales support while training representatives and customers of the company on its
products and applications.” Key result areas included customer satisfaction, employee
development, in house instrument repair, telephone customer assistance and
troubleshooting, cost effectiveness, and safety.
2. First round of interviews
Strategic Consulting had previously met with the General Manager of the Company.
He stated his desired outcome of the improvement project. It was very consistent with the
Service Department Manager’s view. This showed an internal alignment of purpose.
We presented a process of collecting information on the work processes within the
department. The Manager and I met with the employees of the Service Department away
from their workplace. We discussed the objectives of the improvement project and went
through an example of how we wanted to document work processes. We chose a process
that all employees were familiar with, that was important to the department, and that each
worked on in some way. This proved to be invaluable as a learning tool.
It took us about two hours to go through the entire process. We outlined all of the
steps of how work was actually performed. We then asked for suggestions to make the
process better. In order to help employees think through these suggestions, we asked
them to view it from the customer’s point of view. What would the customer want from
this process? For many, they had not given this question much thought in the past.
To everyone’s surprise, we identified about 10 suggestions for improvement. We took
it a step further and suggested what kinds of cost, quality, or throughput time savings
could be made if this suggestion was to be implemented. It surprised everyone how much
improvement could be made if they thought about it.
At the end of the first session, we identified 10-15 additional work processes that
made up the work of the department. We identified employees to work on documenting
each of the processes. In some cases, we made up groups of 2-3 employees to do the
work. We asked that they come to the next work session with their process documented.
Three weeks later we held the next departmental meeting. About half of the 10 work
processes were presented, suggestions for improvement were made by others, and we
identified action steps required to make the improvement. One week later, we met for the
third time and completed the process documentation. To our surprise, we had collected
approximately 100 suggestions for improvement in total! There was some duplication,
but we combined some suggestions, decided to discard some, and table others. The
change process had already started. Employees were thinking differently and focused on
the customers of their department.
3. Synthesis Session
Over the next three weeks Strategic Consulting and the Manager completed several
• First, we formalized the written documentation of the work processes
• Secondly, we completed an activity based cost study, assigning departmental
labor and expenses to major activities.
• Next, we developed a matrix of workload by employee to determine the work
processes that had the largest impact in the department. For example, we found
that four work processes made up 50% of the total resources in the department.
• Finally, we took all of our suggestions for improvement and assigned them on a
matrix of importance and effort required to implement. This was very useful in
developing priorities of which actions to take.
4. Identify the Linkages
Using the written process documentation the Manager identified and developed
linkages between suppliers, work processes, and customers. There were 12 suppliers of
information, support identified and six key customer groups. All relationships were
identified at the work process level. Between this analysis and those mentioned in section
3 we were able to see the impact of improvement on key customer groups. At this point,
it became very clear which measures were appropriate for the department. The table
below summarizes the key measures.
Category Theme Measure
Financial Improve operational Cost reduction rate
Sales revenue vs. expenses Comparison and improvement over time
Customer Customer satisfaction Customer service index
Service attributes Throughput time of repairs
Internal Processes Key work process improvement Field service support
Telephone calls-product discussions
Housekeeping audit scores
Learning Employee satisfaction Employee survey –pre and post assessment over
a two year period
Skill development Training matrix
Information development Product library completion
# of suggestions implemented Inclusion in department work plan
The goal was to balance measures across four major categories as outline in the left-
hand column. We also balanced measures between leading measures—those that would
be indicators of future performance---and lagging measures—those that were end result
Although the table oversimplifies the process of determining the measures, the overall
goal was to develop a monthly measurement report that could be condensed to one sheet
and tell the manager and employees the department’s performance.
The next step was to determine specific targets for each measure.
5. Develop targets
There were three steps to developing targets in the project: 1) the use of historical
data, 2) the projection of improvement possibilities from the first round of interviews,
and 3) the development of new measures that previously did not exist.
A key measure using historical data was service repair. Although the department has
kept track of start dates and completion dates for several months, no one had analyzed the
throughput time to see what it was if it was getting better or worse. We have found this
same pattern in many improvement projects---data is collected, but information if not
formulated or analyzed.
In taking the service repair process a step further, we then looked at the process
documentation and the suggestions for improvement that were made by employees in the
first round of interviews. Because we asked what improvements would be made in cost,
quality, and delivery through actions taken, it was relatively easy to project potential
We went through each major work process in this fashion. There were some measures
that did not exist—for example; employee satisfaction had never been measured. We
decided to use the Likert System 4 employee survey instrument. We also decided that we
would conduct a second round of surveys using the same instrument at a later time. It
turned out to be two years later.
By working through each major measure we were able to establish stretch targets that
seemed achievable with a solid effort. Later in this paper we will share the targets and the
6. Develop Baseline and Trial Period
For the next three months we took departmental goals/targets and broke them down
into individual work plans and actions. At the end of each month we captured data and
used the month end report. With three months of information we began immediately to
start seeing improvement. We underestimated the extent and speed that improvement can
take when actions are planned, focused, and measures are in place.
We also noticed immediately the importance of processes that are taken for granted—
specifically training and communication. Many of our initial action steps required
employees to learn. Training became such an important element of the improvement
effort that we quickly defined training as the most important work that could be done. We
literally redefined it to mean ‘investment in the future.’ It took on a life of its own that is
hard to describe.
Staff meetings were held regularly and were very meaningful. All employees were
becoming familiar with all work processes. Our approach to training included the
development of a training matrix that assured that an appropriate amount of employees
knew how to do specific and important pieces of work. It didn’t take long before
employees wanted to sign up for more and more knowledge based assignments. The
month end report added a powerful dimension and employees could see the fruits of their
labor. The manager’s natural leadership ability also played an important role in day to
day reinforcement of high performance.
7. Develop an Annual Plan
The timing was such that the end of the year was drawing near. We decided to
develop a plan for the next year. With our three-month trial period having concluded, it
was a simple matter of pulling the group back together and reviewing work processes to
see that the next year might look like. We quickly learned that there was no such thing as
an annual plan, but an evergreen process of planning, working, checking results, and
improving. It became second nature.
8. Results Achieved
The following table summarizes the targets that were set and the results achieved
Measure Target Actual Results Comments
Cost Reduction 15% Reduction in actual 22% Reduction the first
expenses for each of the first year and 15% reduction
two years—based on constant in each of the next two
volume years—Total $230K
Customer Improve customer satisfaction Scores improved over a
Service survey scores by 20% three year period by
Service repair Reach industry standard of 10 Reached 7 days within 3 We started at an average
throughput time days months and held of 22 days. This was the
between 3-6 days for a most significant driving
three-year period force for all
each employee’s work
impacted the result.
Field Service Reduce need for on site field Reduced to an average Field service calls were
Calls calls by 50% from 20/month to of 7/month with six an expense to the
10/month within a year months customer. By improving
solving problems over
the phone vs. on site
visits. Quality of service
Employee Allocate at least 5%/year Averaged 8% over a In addition to individual
Development training and development three year period development goals,
Time time/employee employees were
encouraged to work on
learning additional skills
anytime their normal
workload allowed. This
was done according to
an individual training
matrix established for
# of Suggestions At least one suggestion/month One suggestion/month This was included in the
implemented within the department within the department departmental work plan.
on the average
Employee An improvement in the The department initially FYI—System three is
satisfaction Department employee survey scored in System Two more participative and
score (Likert System Four) and move to System close to becoming self
Three within 18months; managed work teams
scores improved by 25%
The success of this project occurred for several reasons:
1. There was a high state of readiness for improvement. The continuation of poor
departmental performance had reached an unbearable state. A new manager was
called in, a positive environment was established, and there was strong management
2. The Manager had an unusual curiosity for learning and making improvements. He
often times would remark on how he was learning from everything that happened, be
it positive or negative. This attitude allowed sustainability of the improvement effort.
3. There was a high degree of employee involvement. We started right away from the
premise that we wanted employees to know their work procedures in a profound way.
We also created expectations that they were in the best position to make
improvements. We created a forum and a system that allowed those ideas to be
captured and implemented if appropriate. We taught employees principles such as
break-even analysis, cause and effect, and to some degree—systems thinking
4. There was a high degree of shared leadership. In looking back, it was easy to see how
different employees, along with the Manager, demonstrated periods of leadership that
were unique to the situation and played off of their individual strengths. We are not
sure how this happened, but suspect that the open and positive work environment
provided positive reinforcement and courage to act.
5. Conflict was dealt with immediately and appropriately. Depending upon the situation
and the person(s) involved the Manager had a unique ability to do the right thing.
This is not to say that everything always went well. There were times the Manager
would say ‘I made a mistake, or I should not have done ….’ This openness was
consistent and played an important role in modeling behavior.
6. Performance measurements were powerful levers of change. Every effort was made
to engage each employee in at least one of the departmental measures. Actually, most
were involved in several. Their individual work plans were connected to departmental
goals. Employees were able to see how they fit into the bigger picture.
Of course, some things did not go well. The important thing was the learning that
occurred at those times and how there was continuous improvement even in adversity.
• The Supervisor (under the Manager) did not buy into the approach taken. After
several attempts at trying to work through differences an impasse was reached. The
Supervisor was given an alternative to move to another department within the
company. They declined and quit.
• The service department became the target of criticism from other departments in the
company. Others were envious of their success and attention and there were several
attempts to discount their progress. To the employee’s credit, they rose above the
negativity and in fact built very strong relationships with key internal suppliers and
customers. Demonstration of their willingness to help the ultimate customer was
another example of modeling positive behavior.
• Success did ‘go to their head’ on several occasions. The department sensed they were
invincible and ‘could do anything they set their minds too.’ The natural ups and
downs of organizational life brought them back into a normal sense of reality over
• There were some months when the training time was excessive (20% or more). Senior
management became very suspicious of this lax time and wanted to intervene to
reduce headcount in the department. Through outside discussions with Strategic
Consulting and the Manager we convinced them to take a wait and see attitude. If the
decision was made to reduce headcount overtime (which it was on one or two
occasions) it was done through careful management of attrition (which was very low).
This project offered an unusual opportunity to make improvement over an
extended period of time. The success experienced was exciting and long lasting.
Employees could not wait to come to work and ‘manage their work processes.’ Many felt
that the ‘doing the work’ was much like creating a piece of art. The job design and
organizational climate was inviting to them and allowed them to utilize knowledge and
skills that they had not been accustomed to doing.
During the next three years this concept was spread throughout the company (in
approximately 15 departments. Of those, about a third performed in an outstanding
manner (15% improvement or higher). Another third were average (5-10%
improvement), and the final third did not experience the kinds of success and
improvement of others (less than 5%).
We collectively learned from all of these experiences and over time made
corrections and thrived on the next round of improvement efforts. Today, the company is
stronger than ever. Even some of the early skeptics have contacted Strategic Consulting
to state that “while they didn’t agree or understand completely those early efforts, they
now see the soundness of the approach in taking them to where they are today.”